Why Lower TCS Matters for Indian Students Paying Overseas Tuition Fees

Tax Collected at Source (TCS) Under LRS

Under the Liberalised Remittance Scheme, Indian residents can remit money abroad for specific purposes, including:

• Tuition and living expenses for overseas education
• Medical treatment abroad
• Travel and other approved purposes

When sending such money, banks collect Tax Collected at Source (TCS) from the remitter at the time of transfer. TCS is not an additional tax; it is adjustable against your total income tax liability and can be claimed back when filing returns. However, the immediate deduction affects short-term cash flow.

Previous TCS Rules (Before Budget 2026)

Before the 2026 Budget:

• For remittances over ₹10 lakh for education or medical purposes, TCS was 5%.
• Other categories could attract higher tax rates.
• Even if education loans were used, the upfront TCS affected the funds available abroad at the time of transfer.

This upfront withholding — though refundable — often meant less money immediately accessible for fee payments and visa proofs.

What Changed

In the Union Budget 2026 proposals, the Government of India announced that:
TCS on foreign remittances for education and medical purposes under LRS will be reduced from 5% to 2%.

This applies to amounts over ₹10 lakh and is designed to ease upfront tax costs for Indian families transferring funds for overseas tuition fees and related expenses.

By lowering the TCS rate, students and families can retain more funds immediately, instead of waiting for adjustments or refunds at the end of the financial year.

1. More Funds Reach Overseas Accounts

When Indian students or their families send money abroad to pay tuition fees and living costs, banks deduct TCS immediately.
At a 2% rate instead of 5%, significantly more funds are available abroad right away — a major benefit when making large semester-wise or annual payments.

2. Better Support During Admissions & Visa Processes

Universities and visa authorities often require proof of funds, sometimes before issuing an offer letter or visa stamp.
With lower TCS, students can maintain higher balances at the time of remittance, strengthening financial documentation and compliance.

3. Eases Planning for Self-Funded Students

While some education loans enjoyed concessional TCS treatment earlier, many Indian families still self-finance study abroad expenses.
Lowering the TCS reduces immediate cash outlay, making planning and budgeting smoother for self-funded students.

4. Reduces Financial Bottlenecks

High TCS deductions meant families had to remit significantly more to ensure the required net amount reached overseas accounts.
Now, with a lower upfront deduction, financial bottlenecks, especially during crucial stages like admissions, fee deadlines, and visa proofs, are reduced.

Here’s how the Budget 2026 TCS change affects students and families:

• Lower upfront deduction: More funds reach overseas accounts directly at transfer.
• Stronger financial proof: Easier to meet university and embassy requirements.
• Improved cash flow: Helps with planning large semester-wise or annual fee payments.
• Reduced family burden: Reduces immediate tax outgo when supporting a student financially.

While this does not lower the overall cost of studying abroad, it makes the payment process less financially heavy at critical stages.

Managing international education finances, including handling overseas tuition payments, remittances, and compliance documentation, can be challenging.

As trusted overseas education consultants, we help Indian students:

• Understand official Budget updates and policy changes
• Plan remittance schedules to avoid delays
• Prepare documentation for visa proof of funds
• Navigate international banking and compliance formalities

If you’re planning upcoming admissions or sending education funds abroad, our expert advisors can guide you at every step.

The Union Budget 2026’s decision to lower the TCS rate on overseas education remittances under LRS from 5% to 2% is meaningful financial relief for Indian students and families funding studies abroad.

By reducing upfront deductions during fund transfers, this change improves cash flow at crucial moments such as tuition payments and visa financing, making the financial side of studying overseas smoother and more manageable.

Staying informed about such official policy updates and seeking guidance from experienced overseas education consultants can make your study-abroad journey more confident and well-prepared.

1. What is the new TCS rate for education remittances?

Budget 2026 reduced the TCS rate on education remittances under LRS from 5% to 2%.

2. Does this lower the total cost of studying abroad?

No — it reduces upfront tax collected at the time of fund transfer, not actual tuition or living costs.

3. How does lower TCS help with visa applications?

Lower TCS deductions mean higher net funds are available when showing proof of finances for visas.

4. Do education loans still get TCS relief?

Some education loan transfers had concessional TCS treatment earlier; this change mainly benefits self-funded remittances.

5. When does the new TCS rate take effect?

The revised rate applies from the 2026–27 financial year for remittances under the Liberalised Remittance Scheme.